A modified candlestick built from averaged OHLC values. It suppresses noise so trend persistence stands out, and reads momentum from body color streaks and the presence or absence of wicks.
Heikin-Ashi (Japanese for "average bar") does not plot ordinary candlesticks. It redraws them from averaged price values.
The body's close is the average of the current bar's open, high, low, and close. The body's open is the midpoint of the previous bar's open and close.
Where a normal candle shows raw what happened in that period, Heikin-Ashi absorbs information from the prior bar and smooths it.
Because each bar drags a little of the previous one along with it, the small back-and-forth chop disappears, and the direction and persistence of the trend become visible at a glance.
How to Read
OANDA:USDJPY
If ordinary candles are a set of points, Heikin-Ashi draws the flow. That is why trend-followers have leaned on it for so long.
The price of that smoothing, though, is that the values drift away from the real close. That is the central caveat, which we return to below.
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